Hypothetical Market Familiarity and the Disconnect Between Stated and Observed Values for Green Energy

Year 2013, Volume: 3 Issue: 1, 10 - 19, 01.03.2013

Charles Sims

Abstract

Participation rates and utility premiums for green power programs are generally less than implied by contingent valuation studies. This study compares open-ended and dichotomous-choice responses with actual participation rates of a green power program to examine the effect of hypothetical market familiarity. Traditionally, respondents are asked to value a renewable energy “block” which represents a quality improvement in a percentage of a good. When placed in a more familiar market setting, stated values are more closely aligned with premiums currently charged. Participation rates remain exaggerated indicating responses are viewed as a vote in favor of or against cleaner energy sources.

Keywords

Contingent valuation, green energy programs, renewable energy blocks, scope effects, coal-fired power plants, single-bounded dichotomous choice